Mortgage lending rockets at its fastest pace in 8 years

The surge in lending has been partly driven by investors trying to beat the Stamp Duty hike, according to the BBA.

Mortgage lending rose at its fastest pace for nearly eight years in January as investors rushed to beat the Government’s Stamp Duty hike.

Total lending hit £13.6bn during the month – that’s 38% more than in January 2015 AND the highest monthly increase since July 2008, according to the British Bankers’ Association (BBA).

Lending levels look set to remain strong going forward, with approvals for house purchase rising 27% year-on-year. Meanwhile, loans in the pipeline for remortgaging and buy-to-let soared by 42% and 43% respectively.

Why is this happening?

Richard Woolhouse, chief economist at the BBA, said: “The start of the year has seen a significant rise in mortgage borrowing.

“It seems that this has been driven, in part, by borrowers looking to get ahead of the increases in Stamp Duty for buy-to-let and second home buyers scheduled to come into effect in April.”

Meanwhile, concerns that interest rates may start to rise soon are also ensuring a steady stream of remortgaging business.

Who does it affect?

The fact that mortgage lending is rising at such a fast rate shows the market is continuing to recover after the financial crisis.

But the rush is bad news for people looking to purchase a property, as it increases competition at a time when the number of homes for sale is already at a record low.

The ongoing mismatch between supply and demand is continuing to push property prices higher, making affordability become increasingly stretched.

Sounds interesting. What’s the background?

Research by the Council of Mortgage Lenders (CML) found that 60% of first-time buyers now take out a mortgage for a term that is longer than the traditional 25 years - roughly DOUBLE the number who did so a decade ago.

“It seems that this has been driven, in part, by borrowers looking to get ahead of the increases in Stamp Duty for buy-to-let and second home buyers scheduled to come into effect in April.”

The group attributed the sharp increase to mounting affordability pressures.

Regional figures released by the CML today showed a fall in first-time buyer numbers in both London and Scotland between October and December 2015, compared with the previous three months.

But those buying their first home are receiving some relief from lower mortgage rates.

The average cost of a two-year fixed rate loan for borrowers with just a 10% deposit has fallen to 2.99%, the first time it has ever dipped below 3%, and significantly lower than the 4.27% it averaged two years ago, according to Moneyfacts.co.uk.

Top 3 Takeaways

Mortgage lending rose at its fastest pace for nearly eight years in January ahead of the Government’s Stamp Duty deadline.

Total lending hit £13.6bn during the month - 38% more than in January 2015 AND the highest monthly increase since July 2008.

Mortgage approvals for people remortgaging jumped by 42%, while loans in the pipeline for buy-to-let purchases soared by 43%.